Top Labor and Employment Issues in Automotive to Watch in 2018

Although the Trump administration made a mark on labor and employment policy at the federal level in 2017, employers can expect greater movement in 2018 once more of Trump’s nominees for federal agencies take office and implement more business-friendly policy changes. Increasing media coverage about sexual harassment and racism in the workplace also demonstrates that employers must continue to comply with longstanding employment laws.

This post discusses the top labor and employment issues that will affect the automotive industry in 2018, as well as relevant and significant upcoming policy changes and how employers should address these issues.

Sexual Harassment and Assault Allegations

Over the last year, many women and men shared their experiences of sexual harassment and assault, bringing down high-profile figures in politics, the media and Hollywood. Employers across the board need to ensure they take all complaints of harassment and discrimination seriously, conduct thorough investigations and take appropriate action to discipline offenders and prevent future improper conduct. Defending against lawsuits is costly and failure to promptly and adequately address allegations can create a toxic culture and drive away talented workers.

Takeaways: Employers should review their nondiscrimination and harassment policies to ensure: 1) employees have sufficient avenues to bring complaints to the company, particularly if the alleged wrongdoer is in a senior/management position, 2) employees understand how to file complaints and know they won’t face retaliation for reporting them and 3) all complaints are thoroughly investigated and that appropriate action is being taken against offenders.

These policies must be robust and should provide at least two reporting routes, such as Human Resources, an anonymous hotline, or upper management. Additionally, policies should be communicated to employees at least once per year during training. In-person training (as opposed to online modules or webinars) is recommended. Where needed, employers should ensure compliance with any legal changes and demonstrate that zero-tolerance policies are priorities for the organization and have the support of top managers.

Joint NLRB and EEOC Guidance on Harassment and Protected Speech

In recent years, there has been tension between equal employment laws and the National Labor Relations Act. During the Obama administration, the National Labor Relations Board sought to expand employees’ rights under the NLRA and often ordered that workers who were terminated for using vulgar language or even racial epithets in the context of union disputes be reinstated. For example, in Cooper Tire & Rubber Co. v. NLRB, a federal appeals court in August 2017 upheld the NLRB’s decision to reinstate an employee who was fired after making racist comments while picketing during a strike.

While certain impolite speech and behavior must be tolerated under the NLRA if it occurs in the context of protected activity, employers are required under Title VII to take steps to prevent unlawful workplace harassment, which may involve appropriate discipline for harassers. To address this concern, the NLRB and the Equal Employment Opportunity Commission are currently working on joint guidance to help employers understand how to address and prevent harassment without infringing on employees’ rights under the NLRA.

Also under Obama, the NLRB in 2015 scrutinized policies in employee handbooks and issued guidance that stressed that policies requiring workers to be “respectful” are unlawful because they may “chill” protected speech. However, in December 2017, the NLRB general counsel withdrew this guidance, and the NLRB issued a decision in a case involving The Boeing Co. that reversed precedent, finding that employee handbook policies were unlawful if employees could “reasonably construe” them as infringing on their rights. The new standard for employee handbook policies is more deferential and considers the employer’s “legitimate justifications” for such policies.

This appears to be just the beginning of an aggressive reversal by the Republican-controlled NLRB away from the previous expansion of workers’ rights. The NLRB also reversed in December 2017 the standard for “joint employment,” which was previously an expansive standard that made employers more likely to be held jointly liable for labor law violations committed by other “joint” employers, and it also reversed the standard for “micro-units,” which made it easier for small groups of employees to organize as a single unit for collective bargaining purposes. Expect the NLRB to continue to reverse major precedent in a pro-management direction in 2018.

Takeaways: Stay tuned for the joint NLRB-EEOC guidance on harassment and protected speech. Employers with a unionized workforce or those dealing with a union-organizing campaign need to understand these issues before disciplining employees who are engaged in union-related activities. Also, employers should keep updated on NLRB developments, as the agency is poised to issue major and consequential rulings in 2018.

Developments on Wage and Hour Laws

The U.S. Department of Labor issued regulations that were initially set to take effect in 2016, which would have nearly doubled the minimum salary threshold required for various employees to qualify as exempt from overtime under federal law. However, implementing this was delayed and then halted following a federal court decision enjoining implementation of the regulations. Now, the DOL is again considering increasing the salary threshold for “white collar” employees, but this increase is expected to be more modest than what the Obama administration proposed in 2016.

The DOL also solidified its new, pro-business direction in 2017 when it withdrew Obama-era guidance that narrowed how the department would define an “independent contractor,” resulting in greater potential liability for misclassification of “employees” as contractors. At the same time, the DOL withdrew its prior guidance on “joint employment,” which had expanded employers’ potential liability for wage and hour violations committed by the “joint” employer, such as a contractor or temporary staffing agency. The DOL’s opinion letters providing guidance in both of these areas were withdrawn in July 2017.

Looking ahead, the U.S. Supreme Court will decide whether “service advisors” who work for car dealers may qualify as exempt from overtime under the Fair Labor Standards Act. Oral arguments in Encino Motorcars v. Navarro were scheduled for January 2018. While there is an exemption under the FLSA for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles,” the Navarro petitioners argue that service advisors do not fall within those categories. This ruling may finally bring certainty to auto dealers with respect to service advisors, although it may result in greater overtime pay obligations if the petitioners prevail.

Takeaways: While employers can breathe easier now that the department has abandoned its aggressive positions on joint-employer and independent-contractor status, they should ensure their independent contractors or employees who are “exempt” from overtime legally qualify as such. Employers should consider asking legal counsel to review contractor and exempt positions to ensure that workers are not misclassified. Misclassification can result in substantial liability for unpaid wages for two or more years, liquidated damages and attorneys’ fees, so it is crucial to get it right.

Class Action Waivers and Arbitration

In recent years, the NLRB has held that arbitration agreements in which employees waive their right to bring class actions are unlawful because they restrict employees’ rights to engage in “concerted activity” under the NLRA. The U.S. Department of Justice has reversed its earlier position and sided with employers in the case, creating a rare situation in which two federal agencies (the DOJ and NLRB) argued opposite sides in a case before the Supreme Court.

In October 2017, the Supreme Court heard oral arguments in Epic Systems Corp. v. Lewis, which involves a dispute over whether employees may be required to enter into arbitration agreements in which they waive their right to file class-action lawsuits in the employment context. The court’s ruling is expected to hold that, similar to its rulings in the consumer context, such agreements may prohibit employees from pursing class relief.

Takeaways: The court’s ruling in Epic Systems Corp. v. Lewis will have major implications for employment agreements, and employers should be sure to involve legal counsel in reviewing and updating agreements to make sure they comport with the ruling. A well-drafted independent contractor or employment agreement can limit potential liability for employment-related claims, as arbitration is generally a less costly and more efficient forum for resolving employment disputes than litigating in court.

Additional Hot Topics Affecting Automotive in 2018:

Through an executive order, the Trump administration has proposed shifting the current H-1B visa program from a lottery to a “merit-based” system that awards visas to applicants based on their skills and education. In 2018, employers should pay attention to further proposals by the administration to limit or restrict the use of these visas.

Mandatory drug testing. The Occupational Safety and Health Association is reconsidering its guidance that mandatory drug testing is suspect and that automatically drug testing all employees involved in an accident, particularly if drugs or alcohol were involved, discourages individuals from reporting injuries. Stay tuned for a possible reversal that would allow mandatory post-accident drug testing again.

Electronic reporting of illnesses and injuries. Employers with 250+ employees and with 20-249 employees in the “automotive parts, accessories and tire stores” industry are now required to submit illness and injury reports electronically: the OSHA Form 300A summaries for 2016 were due by December 2017 and the 300A summaries for 2017 are due by July 1, 2018.

Paid family and sick leave. Based on the newly signed tax-reform legislation, eligible employers that pay workers 50 percent of their regular wages while on paid leave up to 12 weeks would receive a tax credit for 12.5 percent of such wages, and employers providing workers 100 percent of their regular pay during paid leave receive a 25 percent tax credit. Republicans have also supported legislation that would exempt employers that offer workers a certain amount of paid time off from having to comply with state and local paid leave requirements.

LGBTQ employee rights. The Supreme Court may soon be called upon to decide whether Title VII prohibits discrimination on the basis of sexual orientation, as federal appeals courts are split on the issue. The Obama administration issued an executive order that prohibited federal contractors from discriminating against employees’ sexual orientation or gender identity, and later put forth guidance that workers are permitted to use restrooms consistent with their gender identity. The Trump administration has blocked a reporting requirement under this executive order, but it otherwise remains intact.

Pay equity. To address the gender pay gap, many states and cities have passed laws that prohibit employers from inquiring about job applicants’ salary history so that employers do not use past salary information to justify future disparities. Employers will not be required to federally disclose employee pay data on their EEO-1 forms now that the Trump administration blocked an EEOC pay data reporting requirement.

Regulation of government contractors. In its fiscal year 2018 budget, the Trump administration proposed merging the Office of Federal Contract Compliance Programs and the EEOC, which would require Congress’ approval, but a number of groups have expressed concerns with the proposal.

For more on this and other trending topics in the automotive industry, click here to download Foley’s white paper, Top Legal Issues Facing the Automotive Industry in 2018.

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